South Africa’s biggest retailer is spending R3.5 million a day to beat load shedding
South Africa’s biggest retailer, Shoprite, has recorded a strong financial performance despite spending over R1.3 billion on diesel to curb load shedding.
In its financial results for the 52 weeks that ended 2 July 2023, the group grew sales by 16.9% to R215 billion, which its supermarkets in South Africa have underpinned.
Checkers and Checkers Hyper also saw 18.0% sales growth, whilst Checkers Sixty60 increased sales by 81.5%. The on-demand grocery delivery app also expanded its services from 300 stores in 2022 to 466 stores in 2023.
The low prices and affordability at Shoprite and Usave also resulted in sales growth of 15.6%.
Overall, the group’s trading profit also increased by 5.7%, which resulted in a trading margin of 5.5% (restated 2022: 6.1%).
“This was notably impacted by the R1.3 billion (2022: R226 million) diesel expense required to operate generators across our Supermarkets RSA store base during the year due to higher stages of load shedding,” the group said.
Averaged out, the group has gone from spending R620,000 a day on diesel in 2022 to R3.56 million a day – a 470% increase.
Due to the effect on liquidity caused by load shedding, the group did not repurchase any shares under its share buy-back programme, which has resulted in the group buying back R1.5 billion worth of shares since the 2021 financial year.
Returning to positive news, the group opened 382 stores (340 net), which expanded its footprint to 3,326 stores – 94 of these new stores were acquired from Massmart.
Amidst the improved financial position, the group upped its dividend by 10.5% to 415 cents per share.
- Group sales of merchandise increased by 16.9% to R215.0 billion
- Supermarkets RSA sales of merchandise increased by 17.8% to R173.6 billion
- Diluted headline earnings per share (DHEPS) increased by 9.7% to 1 159.4 cents (restated 2022: 1 056.9 cents)
- Adjusted headline earnings per share (adjusted HEPS) increased by 3.8% to 1 161.2 cents (restated 2022: 1 118.6 cents)
- Full-year dividend per share (DPS) increased by 10.5% to 663 cents (2022: 600 cents). This is a result of the interim DPS increasing by 6.4% to 248 cents (2022: 233 cents) and final DPS increasing by 13.1% to 415 cents (2022: 367 cents)
- The Group created 8,131 new jobs, including 4,480 jobs retained from the Massmart acquisition
Outlook
In the first six weeks of FY24, the group’s sales growth in its South African supermarkets segment has reached double-digits, which is partly due to a reduction in selling price inflation.
“In terms of costs, the group’s increased diesel expense as a result of the step change in load-shedding from last year is in our cost base from September 2023,” it said.
“The Group continues to trade uninterrupted at current higher stages of load-shedding as a result of the Group’s solar PV installations and considerable diesel generator infrastructure in place across our South African supermarket operations,” it said,
“It is clear that our customers’ disposable incomes are under enormous pressure, and there is an increasing need for us to sustain the lowest prices and best value across our various supermarket formats.”
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